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FTSE 100 5,364.99 -22.35 DOW 11,766.26 -100.13NASDAQ 2,523.14 -32.19 /$ 1.55 unc / 1.19 unc /$ 1.30 unc

MPs fury

at 25bntax owed THE TAXMAN is chasing more than25bn from Britains top businesses,according to a damning report fromMPs published today.

HM Revenue & Customs (HMRC) alsoappears to be too cosy with largecompanies and has refused to givestraight answers to questions, claimsthe Public Accounts Committee,

which has produced the study on taxdisputes.

Margaret Hodge, the Labour MPheading the PAC, said: We uncovered

both specific and systemic failures which must be addressed...It is extraor-dinary that the same officials whonegotiated deals also approved them.

The committee was particularly scathing about senior officials includ-ing Dave Hartnett, the outgoing per-manent secretary for tax at HMRC,accusing him of giving imprecise,inconsistent and potentially mislead-ing answers.

The report also highlights the con-troversial tax deal struck betweenHMRC and Goldman Sachs and saidHartnetts evidence about his relation-ship with the investment bank is lessthan clear.

A spokesman for HMRC said thereport was based on partial informa-tion, inaccurate opinion and somemisunderstanding of facts.

The report comes as pressure groupUK Uncut Legal Action said it will issuelegal proceedings against HMRC over

the Goldman deal on Thursday.Last week a PwC report for the City of London said firms in the SquareMile paid 63bn in tax this year.

BY PETER EDWARDSPOLITICS

Eurozone leaders want to funnel money through the IMF, headed by Christine Lagarde, to bail out governments Picture: REUTERS

EUROPES latest rescue attempt stum- bled yesterday as finance ministersfailed to agree a plan to put as muchmoney as hoped into the InternationalMonetary Funds (IMF) bailout pot.

British representatives stood up toEurozone leaders who demanded anextra 31bn (26bn) contribution fromthe UK, instead favouring a possibleglobal deal in January.

Finance ministers spent the after-noon locked in debate in an attempt to

work out how to give the IMF an extra 200bn, which could then be used to bail out Eurozone governments.

In the end they managed to get acommitment for 150bn fromEurozone nations, and are relying onextra donations from countries out-side the euro including Sweden andPoland to bolster reserves.

The UK had never agreed to givemore under the plan and yesterday chancellor George Osborne held firmin the face of pressure from Eurozoneministers.

A Treasury spokesman told City A.M.The UK has always been willing toconsider further resources for the IMF,

but for its global role and as part of aglobal agreement.

Because of legal constraints and theneed to avoid loans appearing innational deficit figures, the money could come from central banks

BY TIM WALLACEEUROZONE

www.cityam.comIssue 1,536 Tuesday 20 December 2011 FREE

CAPRICESNEW EATERYWE REVIEW

RESTAURANT 34PAGE 20

BUSINESS WITH PERSONALITY

reserves and will be used to help trou- bled nations anywhere in the world,not just in the Eurozone.

Despite the disagreement, relations between Britain and Germany hadappeared to thaw yesterday as foreignminister Guido Westerwelle visited hisBritish counterpart William Hague.

Germany has no hidden agendaagainst the City, Westerwelle said inan effort to improve relations, which

became strained after David Cameron

rejected new EU treaty plans. Analysts fear even if the full 200bn

target had been raised yesterday, it would still not come close to helpingEuropes predicament.

200bn does not really make muchdifference Italy alone requires 300bn in refinancing next year, said

Open Europes Raoul Ruparel. And European Central Bank bossMario Draghi yesterday revealed hefears France will be downgraded, ruin-

ing the EUs own bailout mechanisms.He again refused to buy up govern-

ment debt to help struggling nations.Draghi also told the European

Parliament that the ECB was workingactively as the European FinancialStability Funds (EFSF) agent on all pos-sible scenarios of a French credit rat-

ings downgrade.Meanwhile, Spanish leader MarianoRajoy pledged deep spending cuts inhis maiden parliamentary speech.

Certified Distribution31/10/11 till 27/11/11 is 100,007

SAUDI PRINCE TAKESSTAKE IN TWITTER

ALWALEED INVESTS $300MP6

EU MISSES TARGETFOR BAILOUT FUND

IMF bailout pot: whowill contribute what?Austria 6.13bnBelgium 9.99bnCyprus 480mFinland 3.76bnFrance 31.4bnGermany 41.5bnItaly 23.48bnLuxembourg 2.06bnMalta 260mNetherlands 13.61bnSlovak Republic1.56bnSlovenia 910mSpain 14.86bnTOTAL EURO AREA 150bn

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News2 CITYA.M.20 DECEMBER 20

UBS activistsstay until 2012SWISS bank UBS came under furthercriticism from a senior judge yesterday as it lost the latest round of a lengthy

battle to evict protesters who havetaken over its disused City office.

Lord Justice Lloyd said activists atthe Bank of Ideas can remain in the

block until January and gave thempermission to take their fight againsta possession order on the building tothe Court of Appeal.

The judge said the protesters had been given no notice of a 9.45pmtelephone court hearing on 18November, when UBS subsidiary SunStreet Properties won the possessionorder and tried to kick them out by sending a text message.

The protesters had sought leave toappeal after a High Court judge threw

out an attempt to fight the evictionearlier this month. At the time Mr

Justice Roth criticised the bankslawyers for serious defects in thelegal papers served on activists.

The occupiers appeal will be heardin the Court of Appeal soon after 11

January. UBS, which has health andsafety concerns over the site, said it

was considering the decision with itslegal advisors.

Separately Judge Keith Lindblom, who is hearing a City of London caseover the tented camp outside St Pauls,

visited the site last night.

BY P ETER E DWARDSPOLITICS

NETWORK RAIL WARNED OVER BONUSESSenior management at Network Railshould forget about bonuses next

year, Justine Greening, the transportsecretary, said on yesterday. She wasspeaking after the Office of RailRegulation (ORR) found that theowner of Britains railway infrastruc-ture had failed to meet its punctuali-ty targets and was in breach of itslicence obligations.

RBS NEARS 1.4BN PROPERTY DISPOSALRBS and Blackstone are set to completea deal in which the bank will handover control of 1.4bn of distressedproperty loans to the US private equity group. The move to offload the loansinto a Blackstone-managed fund waslikely to be completed last night. It rep-resents the largest such disposal of UK commercial property debt and would

end a sale process that has lasted 18months.

US THREAT AGAINST EU OVER GREENLEVY ON AIRLINES

The US has threatened to take retalia-tory action against the EU unlessBrussels drops its plan imminently tostart charging any airline flying intothe bloc for its carbon pollution. In asharp escalation of tensions overBrussels move to bring aviation intoits emissions trading system from 1

January, Hilary Clinton has written tostrongly urge the EU to halt or sus-pend its plan.

NEW TWIST IN NORILSK STAKE RIDDLE The mystery over the ownership of amultibillion-dollar eight per centstake in Norilsk Nickel has deepenedafter the international trading housethat was proclaimed to be its buyerrevealed that it now held less thanone per cent of the worlds largestnickel miner. The privately ownedtrader Trafigura told its bondholdersin its annual accounts for the year to

September 30 that it owned 0.9 percent of the $40bn miner.

GULF AIRLINE STEPS UP COMPETITIONEtihad Airways has thrown down thegauntlet to European and MiddleEastern rivals by snatching a 29 percent stake of Air Berlin. The AbuDhabi flag carrier is spending $350m(225.5m) to cement a strategicalliance with the Germanys second-largest carrier.

TOP FIRMS FUND PIRATE WEBSITESLeading British companies, includingBritish Telecom, British Gas, Tescoand easyJet, are indirectly subsidisingthe UKs multimillion-pound net-

work of websites which allow peopleto illegally download films and televi-sion programmes. Despite being

warned by the antipiracy watchdogthat they are advertising on suchsites, these companies are continuingto do so because of the difficulty that

online advertising agencies have inavoiding them.

PIRC DEMANDS DETAILS OF JAMESMURDOCHS HACKING EMAIL

A powerful shareholder group hasdemanded NewsCorp tells investorsexactly when it discovered a 2008email about phone-hacking was sentto James Murdoch, amid growing con-cerns that it was held back until afterBSkyBs AGM. Pirc said Mr Murdochsadmission raises the possibility thatsomeone, somewhere knew aboutthe important email when it couldhave made a difference to the re-elec-tion of the BSkyB chair.

STAYING OUTSIDE EU RISKS MILLIONSOF JOBS, WARN 20 UK BUSINESSMENMore than 3m British jobs will be putat risk unless Britain remains at theheart of Europe, a group of leading

businessmen warn today. In a letter tothe Daily Telegraph, 20 businessmen

say it is imperative that Britain has aplace on the negotiating table.

SWATCH COURT RULING POSES FOR RIVAL WATCH FIRMS

A Swiss courts decision to allow Swatch Group AG to cut its supply of parts to rival watchmakers could

boost Swatch's sales but also forcesome smaller Swiss watchmakers outof business. In its final decision, theFederal Administrative Court over-ruled an attempt by nine companiesto force Swatch to supply mechanical-

watch movements and other parts,an obligation it previously had tocarry out under competition rules.

CONOCO TO DEVELOP ALASKA The US Army Corps of Engineersissued a permit yesterday toConocoPhillips that would allow theenergy company to develop the firstcommercial oil well in the NationalPetroleum Reserve in Alaska. It comes

nearly two years after the corpsdenied Conocos application.

WHAT THE OTHER PAPERS SAY THIS MORNING

When toughened Code doesnt apply

W HILE the Eurozone crisis isstill dominating the agendain the City, there are signs of returning interest in merg-

ers and acquisitions, with some say-ing a mega deal on the scale of Kraftand Cadbury is not that far away.

Opinions might vary about the ben-efits of bids and deals but they are themeat and drink of an investment

bankers work and the recent scarcity of them has added to the pressure felt

by many in the City.Late Sunday night came news that

the board of AIM-listed European

Goldfield had recommended a 1.5bnmerger the Canadian miner EldoradoGold.

And yesterday shares in Gulf Keystone Petroleum rose more than

20 per cent on speculation only thatat this stage that it is about toreceive a bid from Exxon.

As well as being a sign of renewedactivity, or in Gulfs case a sign of renewed expectation of activity, thereis another reason to find these casesinteresting.

Both companies have their shareslisted in London but neither of themare governed by the Citys toughenedup Takeover Code.

When Kraft won its battle forCadbury there followed a publicdebate, spearheaded by formerCadbury chairman Sir Roger Carr, of the rules that govern takeovers in theCity and what followed was a tough-ening up of the Takeover Code.

Hence the put up or shut up rules were tightened to flush out bidders;the drawing up of break fees was pro-

hibited; and hedge funds were forcedto become more public about theirstakes in companies that were being

bid for. While investors might have been

led by the strength of the debate tofeel they are now afforded greaterprotection in the share market, this isnot always the case because a numberof companies, mainly outside theFTSE 100, do not find themselves gov-erned by the Code because they arenot registered in London.

Hence, in the case of EuropeanGoldfields, which is registered in

Yukon, Canada, the board negotiateda 47m break fee with Eldorado

which ensures a payment to eitherside if bid talks are broken off for thesake of pursuing a higher offer.

European Goldfields argues that break fees, which are perfectly accept-able in Canada, are useful in pinninga serious bidder down. But they alsoprovide a disincentive for the board tolook for a higher offer, which could becounterproductive in this case, for

example, when the likes of GoldmanSachs are saying that the current bidis too low.

The case of Gulf KeystonePetroleum is a different issue but

again involves the remit of the Takeover Panel. Yesterday, as sharesrose more than 20 per cent onrumours of a bid from Exxon, thecompany remained silent until 16.10

before issuing a statement to say it was not in takeover discussions afterrumours swept the market.

Bermuda is where Gulf KeystonePetroleum is registered. Had it beenLondon, I have no doubt the Panel

would have forced out a statementmuch earlier to help advise share-holders what to do next (see p.8).

Other companies subject to bids atthe moment include OmegaInsurance and Hardy Underwriting,neither of which fall under thePanels remit.

Time to rethink, [email protected]

Allister Heath is away.

NEIGHBOURS of North Korea as wellas the US yesterday appealed for stabil-ity after the death of leader Kim Jong-il plunged the region into freshuncertainty.

China and Russia offered supportfor their allys new leaders as NorthKoreans took to the streets in scenesof apparently staged-managedmourning. Western states expressedhope that a change could ease the

nuclear nation out of decades of extreme isolation.

Kim suffered a heart attack whiletravelling on a train, North Koreanstate media said, anointing Kims

youngest son, Kim Jung-un, as theGreat Successor. Little is knownabout how he would run a state withone million troops and missiles thatthe US fears could reach its shores.

Yesterday the North test-fired ashort-range missile off its easterncoast, according to reports in mediain the South.

BY HARRY B ANKSPOLITICS

Kims death ups tensio Kim Jong-il was said to have died of physical and mental over-work Picture: REUTERS

NEWS | IN BRIEF

Clegg takes aim at House of LordDeputy Prime Minister Nick Clegg yes-terday set out his stall for reforming theHouse of Lords, which he slammed asan affront to democratic ideals. In aspeech about the values of the opensociety, the Liberal Democrat leadersaid the country was hobbled by closed

institutions and that there would be abill to reform the upper chamber nextyear. He added that the coalition wouldblock any irresponsible bonus payoutsmade by the part-nationalised banks.

BT sues Google in US patent couTelecoms firm BT has launched legalaction against Google in the US overpatent infringement in a number of keyareas for the technology group such asmobile map services. BT said yesterdaythat it had filed a claim relating to sixpatents which BT says are infringed bysuch services as Android, Google Maps,Google Music, advertising services,GMail and other products. MeanwhileGoogle has already been hit by a sepa-rate patent case won by Apple, itemerged yesterday. The victory forApple ruled that some HTC smart-phones infringed Apples patent.

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Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or [email protected]

Activists said theyhave targeted UBSbecause it received aSwiss governmentbailout in 2008

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7283 5334Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features EditorMarc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Gavin BillennessPictures Alice Hepple

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EDITORS LETTER

DAVID HELLIER

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SHARES of Bank of America closed below $5 yesterday for the first timesince the depths of the bear marketin March 2009.

The stock closed at $4.99, downfour per cent, after dropping as low as $4.92. Bank of America accountedfor roughly six per cent of composite

volume on the New York Stock Exchange, NYSE Amex and Nasdaq.

Financial institutions around the world have dropped in recentmonths on worries about the globaleconomy and possible exposure to

sovereign defaults in Europe.Bank of America, in particular,

faces concerns about whether it hasenough capital to absorb mortgage-related losses and meet new interna-tional standards.

Investor Warren Buffett gave theshares a boost in August when heploughed $5bn into the firm in ashow of support for the banks stabil-ity and chief executive BrianMoynihan.

Buffett also has an agreement to buy 700m more shares at $7.14 each meaning that at the current price,his warrants are $1.5bn underwater.

But the Sage of Omaha has ten years to exercise his warrants, giving

him plenty of time to make money on his deal.

NHS workers last night moved closerto a deal on controversial pensionreforms despite some civil servantsand teachers rejecting the coalitionsfinal offer.

A union source said an agreementin principle covering at least 450,000health workers had been hammeredout with government officials.

More talks are due to take place overlocal government and civil service pen-sion schemes but Mark Serwotka,leader of the Public and CommercialServices Union, rejected the offer andsaid nothing has changed since upto two million people went on strikeon 30 November. He has threatenedfurther industrial action if the govern-ment does not relent, although minis-ters have said the offer is final.

A Cabinet office source said the PCS would not be invited to further talksover civil service pensions, sparkingunion accusations of bullying.

Prospect, the second-largest civilservice union, has agreed to furthertalks and Unison, the largest publicsector union, said it will take the offerto its members. Christina McAnea,

head of health, said: On some issues such as contribution rates for the low paid next year, and for people close toretirement we have made progress.On others, we always knew this would

be a damage limitation exercise.Brian Strutton, national secretary

for the GMB, hailed a major step forward in negotiations but added: No-one should underestimate thedifficulties of finishing off the detailand then getting it approved by health

workers out there. The government said it is still hope-

ful of widespread deal by the end of the year. Treasury chief secretary Danny Alexander will make a state-ment in the House of Commons today.

It comes as London Underground(LU) opened a legal challenge againsttrain drivers union Aslef over aplanned Boxing Day strike over pay.

LU is contesting the validity of theaction which follows union demandsfor more money for working the day after Christmas. LUs Howard Collins

branded the strike threat disgracefuland said Boxing Day is already covered

by an agreement with unions. Aslef said going to court means wastingtime and wasting money.

ARSENAL AND CHELSEA TIES HIT: P22

Hopes rise of

end to bitterpensions row

AT&T has agreed to drop its $39bn(25bn) takeover bid for T-Mobile USA after running into a regulatory brick

wall. AT&T said in a statement yesterday

that it will enter a roaming agree-ment with T-Mobiles German ownerDeutsche Telekom instead.

Prospects for AT&Ts plan to buy

the firm, first announced in March,have been dwindling since the USDepartment of Justice and telecomsregulators voiced objections.

In late November AT&T said it would take a $4bn charge in case thedeal collapsed.

The charge is part of a break-up feeagreement, giving Deutsche Telekoma cash payment of $3bn, roamingservices agreement and mobilelicences for T-Mobile USA.

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AT&T gives up oits $39bn takeove

Bank of America shares slide totheir lowest since March 2009

BY P ETER E DWARDSPOLITICS

BANKING

Trades union boss Mark Serwotkasaid that nothing has changed inthe strained talksbetween unionsand the coalition,despite some other workers moving closer to a deal

Picture: REUTERS

BY M ARION DAKERSTELECOMS

News 3CITYA.M. 20 DECEMBER 2011

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STATE-OWNED RBS must shrink and sell off its investment bank on ascale far greater than its manage-ment had previously suggested, thechancellor announced yesterday.

But George Osborne confirmedthe government will implement the

Vickers Commissions ring-fenceproposal and said that semi-nation-alised Lloyds had never faced any intervention to alter its sale of 632

branches.During his formal response to

Vickers report, Osborne said: I believe RBS needs to go further, andthe management agrees. We arethe largest shareholders. Let me setout our view... RBSs future is as amajor UK bank, with the majority of its business in the UK and in per-

sonal, [small business] and corpo-rate banking.

That means it must downsize itsinvestment bank by more thanchief executive Stephen Hester hadstated and marks the first time agovernment has openly used itsshareholding to lay out politicalgoals for a banks management.

But it brings Osborne closer to anincreasing number of analysts who

believe that much of RBS is un-recoverable and that taxpayers areunlikely to make back their invest-ment, which has so far delivered apaper loss of 27bn.

The Treasurys statement on Vickers also confirmed that it hadnever intervened to substantially enhance Lloyds sale of 632 branch-es. It had originally been asked toseek a deal with the bank to make itsell more branches, but City A.M.revealed in May that it did notintend to act on the proposal.

Yesterday it said finally:Execution of the divestment is acommercial matter for Lloyds... Thegovernment does not intend to useits shareholding in Lloyds to deliveran enhancement of the divestment.Peter Vicary-Smith of consumergroup Which? said: Lloyds... needsto be forced to sell more branches.

RBS must shrink butLloyds wins the dayBY J ULIET S AMUEL

BANKING

BANKS across the world will have touse a common format for disclosingthe size and quality of their capitalsafety buffers from 2013 to help reas-sure investors they are stable.

The Basel Committee on BankingSupervision, made up of regulatorsfrom nearly 30 countries, includingthe US, China, Japan and large EUcountries, published draft disclosuretemplates yesterday for consultat ion.

It is often suggested that lack of clarity on the quality of capital con-tributed to uncertainty during thefinancial crisis, the Swiss-basedBasel Committee said in a statement.

The requirement to fully disclosedetails of capital buffers wasenshrined in the Basel III accord,

which will force banks to hold morecapital and liquidity from 2013.

Banks will have to comply withdisclosure rules from the date of publication of their first set of finan-cial statements on or after 1 January 2013.

Basel clarifiesdisclosure ruleson bank capital

REGULATION

News4 CITYA.M. 20 DECEMBER 20

HSBC scored a major lobbying victory yesterday after the government insert-ed a loophole into the VickersCommission proposals that couldexempt the bank from its most oner-ous capital requirements.

The bank had warned that issuing aswathe of new debt instruments asper the Vickers recommendationscould cost it $2.1bn extra a year.

In response, the Treasury saidthat banks international oper-ations could escape therequirement to build up loss-absorbing capital equal to 17-20per cent of its risk-weightedglobal assets.

The bank would only be grant-ed the exemption providedthat those operationsdo not pose a threatto the UK taxpay-er, the govern-ment said.

A Treasury source said that

the process of qualifying for the

exemption is likely to involve talks with a banks foreign regulators.HSBC separately capitalises its geo-

graphical subsidiaries and, as CityA.M.has revealed, Hong Kong regulators,

backed by Beijing, have offered implic-it support to the bank, making it well-placed to get an exemption.

The Treasury also said it wouldchange the rules to put some

savers ahead of bondholders inthe queue of bank creditors.It said: On balance, the gov-ernment supports depositorpreference, but believes thatfurther analysis and consul-tation is needed. Sourceshad said the Treasury was

not keen on the idea: it isunderstood that some sen-

ior officials wereopposed but it was backedpol i t ica l ly. The exactform it willtake is not

yet clear.

HSBC gets loopholein Vickers proposalsBY J ULIET S AMUEL

BANKING

KEY POINTS FROM YESTERDAYS REPORT

Q.DO WE FINALLY HAVE ALL THEDETAILS OF THE COALITIONS BANKREFORM?

A.No. All we have are the main out-lines of its response to the Vickers Commission. Although someelements are clear, the most impor-tant details, such as precisely wherethe Treasury will come down on cap-ital requirements and how the ring-fence will work, remain foggy.

Q.WHEN WILL WE KNOW THE FINALOUTCOME?A. All the government has said isthat it will produce a finalised

white paper by 2015 and that banks will have until 2019 to comply withany bill that is passed. In practice,there is likely to be a consultation

until the spring and potentially a white paper in the latter half of next

year, although the timeline will certainly be affected by a range of international initia-tives on capital rules and banks liv-ing wills.

Q.DO THE CHANGES MADE SO FARMEAN HSBC IS ALMOST CERTAINTO STAY IN THE UK?

A.Not yet. For one thing, Vickers(right) is not the only annoyance for the bank,

which has also complainedabout the bank levy.

But for another, althoughthe bank has won a signifi-cant victory, it cannot besure it will qualify to haveits global businessexempted from the

rules.

VICKERS: WHAT HAPPENS NOW?

CAPITAL RULESThe government has expressed supportfor most of the proposals in the VickersCommissions report: it agrees ring-fencedretail banks will need to have a 10 percent ratio of common equity-to-risk-weighted assets and large banks will needto have primary loss-absorbing capacity capital that can absorb losses of 17per cent on their entire global businesses.But there is a vital caveat: banks that candemonstrate their foreign business doesnot pose a threat to UK taxpayers canapply the recommendations only to theirUK operations. This could persuade HSBCand Standard Chartered to keep theirHQs in Britain. EU LAWBut it is still far form clear that theVickers capital rules fit with European ini-tiatives. Privately, the Treasury believesthere is not enough leeway in draft EUrules to allow it to implement Vickersgold-plated capital rules, and that isbefore Brussels has even published itsplans for bail-in bonds bonds whoseowners must take losses if a bank fails. LLOYDS BRANCHESLloyds has conclusively won a full victoryin its lobbying against being forced to dis-

pose of more branches. The VickersCommission had originally suggested thatthe bank sell more branches, but the gov-ernment has confirmed that it did notintervene in the sale to change it. Instead,

it is content with a narrowed funding gain the branches and the fact that thebuyer, Co-op, already has market share. RING-FENCEThe government says that ICB proposato force banks to ring-fence vital bankiservices (on the retail side) from otherbanking activities, have provided ananswer to the British Dilemma. The ICsays ring-fencing will insulate retail baing against contagion from the disordercollapse of investment banks. COSTSMaking the plans a reality will cost UKbanks between 3.5bn and 8bn, causinan average gross hit of between 800mand 1.8bn to the countrys total GDP, iestimates equivalent to a reduction o0.07 per cent to 0.14 per cent in the longterm. Tax receipts would fall by 300mto 650m every year. The Treasury saysthe economic benefits would equalaround 9.5bn a year, yet banks say thecost estimates are too low. COMPETITIONCustomers should be able to switchbetween banks within seven days a prposal the banks agreed with through thePayments Council. This system should bin place by September 2013. The goverment has stressed that competition-montoring authorities are able to scrutinisethe financial services market as they seefit and at any point when they havereasonable suspicions.

ANALYSIS l Royal Bank of Scotland Group PLC

p

1 3 D ec 14 Dec 1 5 Dec 16 Dec 19 D ec

21.00

20.50

20.00

19.50

19.4019 Dec

Q A&

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SHARES in directories business Yellrose yesterday, although they remainat a fraction of the 592p peak they reached five years ago, as the groupslenders agreed to amend financialcovenants.

The new deal will see Yells creditorsincrease the headroom under thesearch companys 2.6bn net debt, giv-ing Yell more time to deliver on itscontractual obligations.

The group said the bid wasapproved by an overwhelming major-ity of lenders.

Shares climbed 19 per cent to a highof 7p yesterday and closed at 5.7p.

SAUDI Prince Alwaleed has bought a$300m (193m) stake in social net-

working company Twitter, leading tospeculation that the micro-bloggingsite is inching closer to a publicoffering.

However, it has been revealed thatthis transaction will not affect

Twitters bank balance, as the shares were bought in a secondary pur-chase from existing stakeholdersand not from the company itself.

It is likely that the newsannounced yesterday marks

Twitters approval of the investment, while the bid would have been madeas part of an $800m funding dealagreed in September, of which$400m was used to buy secondary shares.

With Twitter valued at around$9bn, this investment gives Alwaleedownership of more than three percent of the company.

Despite Twitters prominent rolein the Arab Spring uprisings,

Alwaleed denied that the move waspolitical, insisting that he had pur-chased a strategic stake.

The Twitter holding, bought joint-ly by Alwaleed and his KingdomHolding Co investment firm, result-ed from months of negotiations,Kingdom said.

Alwaleed added: Our investmentin Twitter reaffirms our ability inidentifying suitable opportunities toinvest in promising, high-growth

businesses with a global impact.Internet investment company DST

Global, managed by Russian billion-aire Yuri Milner, bought a five percent stake in Twitter for $400m in

August half of which was pur-chased from existing shareholders.

The Saudi prince, who is the 26thrichest man in the world and the

wealthiest Arab, made the deal viahis investment group KingdomHoldings.

Alwaleed also holds minority stakes in News Corp, Citigroup,

Apple, Time Warner and WaltDisney, and recently announcedplans to launch a new privately-owned Arabic news channel.

He has also been publicly support-ive of management, including theMurdochs at News Corp andCitigroup chief executive VikramPandit.

Saudi prince

buys $300mTwitter stake

BRITISH online gaming business 888 yesterday said its full-year earningsare set to be significantly ahead of market expectations due to anincreasing trend of cash-consciousBritons staying at home and gam-

bling online. The rosy forecast comes despite ris-

ing gaming duty and the companysplans to invest in several newly-regu-lated markets across Europe.

888, which provides casino, sport,poker and bingo services, recently reported a third quarter revenue

jump of 42 per cent on last years fig-ure.

Lucky 888 asgamers stay inYell gets timeto sort its debt

BY LAUREN DAVIDSON

TECHNOLOGY

TECHNOLOGY TECHNOLOGY


Prince Alwaleedsaid his Twitter investment is not

political

ALWALEEDS GROWING MEDIA EMPIRE

Twitter

Rotana Media Services

News Corporation

LBC International

3 .7 5 %

Apple

9 1 %

7 %

9 0 %

5%

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SHARES in oil explorer Gulf Keystoneclosed up 7.7 per cent yesterday onreports that Exxon Mobil was liningup a takeover bid.

Its shares had rocketed as much as32 per cent during the day, and wasthe second most-traded stock on AIM,

with 46.8m shares changing hands.Gulf released a statement at 16.10

saying that the board was not in dis-cussions about a sale, though there isclearly increasing interest in theregion in which [the f irm] operates.

Exxon was named as an interested bidder for Bermuda-based Gulf Keystone which has made huge oilfinds in the semi-autonomousKurdistan region of Iraq with reportssuggesting a bid of up to 7bn. Exxon

would not comment. Analysts dismissed the prospect of

such a high bid from the Texas-basedoil giant, which made headlines withits own recent entry into the semi-autonomous Kurdish region of Iraq.

We fear an element of yuletide wishful thinking may also be playing apart, said Richard Savage, oil analystat brokerage Mirabaud.

Kurdistan said last month thatExxon had signed contracts for sixexploration blocks.

And Gulf Keystone said inSeptember it was seeking a buyer forits 20 per cent interest in the Akri-Bijeel block in Kurdistan in order tohelp finance development of otherassets. Industry sources said the firmhas mulled a sale of other parts, or all,of its interests in Kurdistan.

Gulf Keystonesoars on talkof Exxon bid QATAR Holdings could yet providesome of the financing for the develop-ment of European Goldfields miningassets despite its deal being wrecked by

a Canadian takeover.Eldorado Gold announced yesterday

that it will acquire EuropeanGoldfields for C$2.5bn (1.55bn)through a share swap that it aims tocomplete by the end of February.

The deal scuppers a previous agree-ment signed by the Qatari sovereign

wealth fund and European Goldfieldsthat saw the former acquire 9.9 percent of the miners shares and agree togive it a $600m loan and a furtherequity injection of $150m.

Yesterday, Tim Morgan-Wynne,finance director of EuropeanGoldfields, implied that Eldorado islikely to provide most of the cash forcapital expenditure but did not wholly rule out a Qatari contribution.

Eldorado brings a strong balancesheet with cash reserves that is suffi-cient to fund a development pipeline,he said. But he added that the compa-ny is still in touch with Qatar Holdingsand that the vote on its financing offerhad been postponed, not cancelled.

And he did not lay out a financingframework to achieve the miners planof more than doubling production by 2015.

Qatar waitingon sidelines inGoldfields dea

European Goldfields president Martyn Konig has done a deal with Eldorado

BY J OHN DUNNE & M ARION DAKERSENERGY

COMMODITIES


Lazard and BMO Capital Marketshave jointly advised EuropeanGoldfields as it agreed a takeoveroffer from Eldorado Gold wortharound 1.55bn.

The takeover has been agreed bythe boards of both companies.

The Lazard team was led by SpiroYouakim, global head of basic indus-tries, who joined the firm in August2008 from Citigroup. AlongsideYouakim were Chris Seherr-Thoss andNicola Enticknap.

Lazard operates in 42 cities across27 countries in North America,Europe, Asia, Australia, Central and

South America.With origins dating back to 1848,

the firm provides advice on mergersand acquisitions, strategic matters,restructuring and capital structure,capital raising and corporate finance,as well as asset management servic-es to corporations, partnerships,institutions, governments, and indi-viduals.

The BMO team was led by EgizioBianchini, co-head of metals and min-ing, and Gary Mattan, a managingdirector in mergers and acquisitions.

Canada-based BMO FinancialGroup serves 13m personal, commer-cial, corporate and institutional cus-tomers in North America andinternationally.

European Goldfields nominatedadviser and joint broker is LiberumCapital, with a team led by MichaelRawlinson, a company director andhead of mining, alongside corporatefinancier Tom Fyson.

SPIROYOUAKIM

GLOBAL HEAD OFBASIC INDUSTRIES

ANALYSIS l Gulf Keystone Petroleum Ltd

p

13 Dec 14 Dec 15 Dec 16 Dec 19 Dec

210

200

190

180

170

178.2519 Dec

ADVISERS: LAZARD

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It is understandable theyhave suffered this year asit is an expensive brand.Though it has high qualityfood, other thanon special occa-sions we useSainsburys asit delivers at abetterprice.

I remember Ocado hashad trouble before, so it isnot very surprising. I cantuse it as I live in such ahigh flat with nolift, but if Ilived on alower floor Iwould use itas a timesaver.

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SHARES in Ocado took a battering yes-terday after the online grocer warnedthat full-year profits would come in

below expectations, due to problemsat its main distribution centre innorth London.

The company, which sells goodsfrom high-end supermarket chain

Waitrose, said underlying earnings forthe year would be within a range of 27.5m--28.5m, down from analystsconsensus of 34m.

Ocado said profit margins had beenhit by capacity constraints at its mainHatfield depot and the need to bringon extra staff to keep up customerservice levels during work to expandits operations.

Deliveries reached a record peak of

131,381 orders in the last week of the year to 27 November.

We are encouraged by the opera-tional capacity improvements that wehave made, but are disappointed that

we did not achieve as large or as early an increase as we had originally planned, said Tim Steiner, Ocadoschief executive.

Shares fell 16.85 per cent to 59.20p.

Ocado slumpsafter groceryprofits go off BYKASMIRA J EFFORD

RETAIL

News 9CITYA.M.20 DECEMBER 2011

Delivery pioneer lacks capacity to EIGHTEEN months post float,and those distinctive delivery vans just arent looking sospecial anymore.

Yesterdays profit warning fromchief executive Tim Steiner may

have been expected at some point, but analysts clearly thought thecompany had some breathingroom now its going to be moreunder scrutiny than ever.

And its not as if Ocado shares which have already plummetedmore than 60 per cent since

January and fell another 16 percent yesterday needed any moredownward pressure.

Though management seem con-fident that problems with thegroups Hatfield distribution cen-tre are close to being resolved, thecost pressures theyve highlightedmean the assertion that plans for a

second centre in Warwickshire areon time and on budget may fallon unsympathetic ears.

Any outgoings are going to beunder the spotlight, given thatsales are up but missing consensustargets by as much as 5m onsome estimates. The last thingOcado needs now is the introduc-tion of financial pressures to addto its operational woes.

It may not be a takeover target just yet (although rumours willalways rear their head until Marks& Spencer or Morrisons enter theonline delivery market), but thefact is that Ocado just doesnt

stand out from the crowd any-more. With competition getting

tougher and a gloomy outlook forretailers, that might not be some-thing Ocado has the capacity tochange.

BOTTOMLINEAnalysis by Elizabeth Fourn

ANALYSIS l Ocado Group PLC

p


80

75

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CITY VIEWS: ARE YOU SURPRISED BY THE SLUMPAT OCADO? Interviews by Phoebe Torrance

NICO TYABJIBLOOMBERG

I can see how Ocado didn'tdo very well this yearbecause of the difficult eco-nomic climate. I don't use italthough I shopat Waitrose Ifind it hard totake the leapto an onlineservice likeOcado.

REZA KACICITY INDEX

IAN TWEENMODIS INTERNATIONAL

Ocado, led by CEO Tim Steiner, said fourth-quarter sales had slowed Picture: GETTY

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serves many, and the Armada Treasure Chest made with Cristal at AED 7,500 (1,315). All prices, assuresMahiki, offer value for money

STAR TREATMENT ARSENALs players may have theirmoments but having their club pre-sented as A***nal, as appeared on

Virgin Medias TV menus over the weekend, was perhaps a step too far.

The unfortunate rebranding wascaused by a bug in Virgins automatedprofanity checker, which alsoannounced an adaptation of Bleak House by Charles D***ens, a remake of

The 39 Steps by Hitchc**k, the WillSmith film Hanc**k, and a documen-tary for diehard waterways enthusi-asts called The Golden Age of Ca**ls.

A Virgin Media spokesperson said:A temporarily over-zealous profanity checker took offence at certain pro-gramme titles. The altered titles have

been swiftly an*lysed and were fix-ing any remaining glitches.

Thankfully Scunthorpes Saturday game against Exeter wasnt televised.

TWITTER ACCOUNTSHOULD the City have noticed earlierthat Prince Alwaleed bin Talal of Saudi

Arabia was preparing to invest $300min Twitter? As @dePrince55announced on the microblogging site

on 5 September: Its been a long time but we are back to moreand more success.

The princesKingdom HoldingCompany, which linksto the Twitter pro-file, was yester-day reluctantto confirm

whether thatis the sover-eigns offi-cial Twitteraccount.

Until itc o n f i r m sdefinitively either way, TheCapitalist willcontinue to fol-low the

prince withinterest.

PRICE ISNT RIGHT YESTERDAYS interim results fromHMV warned of even tougher timesahead and raised questions over themusic retailers future viability.

But this wouldnt have come as asurprise for investors who read thecompanys 2011 annual report earlierthis year, which featured artist Jessie Jon the front cover.

After all, Jessie J is famed for hernumber one hit Price Tag, in whichshe sings: Its all about the money,money, money. Perhaps someonecould have told HMV management.

LIZ TAYLOR EFFECTSTEVE Jobs, Michael Jackson, Liz

Taylor: some celebrities keep makingmoney from beyond the grave even,generously, for other people.

Following the $116m auction of Liz Taylors jewels at Christies in New York on 14 December, a number of shoppers have come in to Chelsea jew-eller By Brilliant, which specialises inlab-created diamonds, asking for cut-price replicas of Taylors collection.

Most in demand is a 485 version of the 5.6m Krupp diamond bought for

Taylor by Richard Burton (pictured below left with Taylor) and By Brilliants sales for December 2011 areup by 16 per cent compared to thesame month in 2010.

MEXICAN WAVEPRIVATE equity firm Quilvest helpedfuel the Yo Sushi boom, and now it isdoing the same for Mexican food,investing 3.5m in fast-food outlet

Tortilla. The chain only launched in London

in 2007, but has been spreading like wildfire ever since, adding six furthersites including Leadenhall Market

and Canary Wharf with plans to openin Wimbledon anda ninth, as yetunconfirmed, loca-tion.

As part of yester-days deal, Quilvest

partner Axelle Strain joins the board of

Tortillas direc-tors, whileP a u lCampbell, whose HillC a p i t a lP a r t n e r sfund is anadditionalinvestor int h eM e x i c a n

chain, is

a non-executivedirector.

COCKTAILS AT DAWN AS MAHIKIBRINGS POLYNESIAN FUN TO DUBAIIT WAS strictly guest-list only at lastnights opening party for MahikiDubai. We are expecting 500-plusand queues out of the door, said aspokesperson for the club, whichopens to the public today in the base-ment of the Jumeirah Beach Hotel.

The Jumeirah is a venue complete-ly given over to the pleasures of life,

which makes it the natural habitatfor the Polynesian-themed club that

started in London in 2005 as an anti-dote to the venues that had becomeall about seeing and being seen.

Dubai is where London was six years ago people are out to show off, said the spokesperson, whorefused to confirm which Emirates

VIPs joined Mahikis co-owner Nick House at yesterdays opening becausethe whole brand concept is not toshow off about our famous guests.

Instead, the clubs cocktail menu will have to do the talking a similarlist to the London club except, of course, all prices are in United ArabEmirates dirhams (AED).

Helping put the word fun back into an evening out are BaronSamedis Brew, a vicious voodoo

blend at AED 50 (8), rising to AED1,500 (260) for the champagne andBacardi-based Sea Pearl, which

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HMV has warned that tough tradingconditions may cast significantdoubt over its future after reporting

widening losses and revealed it islooking to sell its Live music business.

The ailing music retailer hasappointed Citigroup to find a buyerfor its fast-growing music venue andfestival business, in its efforts to cutits 163m debt pile.

Chief executive Simon Fox is stillcounting on the extra Saturday

before Christmas this year to helpimprove sales.

This is a crucial week. It is whenthe high street comes into its own,

you start passing the cut off dates foronline ordering but we are in an envi-ronment that is very difficult on thehigh street, he said.

HMV, which has issued three profit warnings in 2011, said pre-tax lossesincreased to 36.4m in the sixmonths to the end of October from

27.4m in the same period last year.Like-for-like sales were down 17.6

per cent and fell by a further 13.2 percent in seven weeks to 17 December.

Fox believes HMV Live, which doubled its first-half profits to 3.4m,could achieve a price of around 60m.

Yet analysts are doubtful, adding thata sale would have a limited affect onthe groups financing.

HMV has refitted 144 of its 252stores to focus on tech items likeheadphones, which it said has helped

boost sales of those products by 42per cent. THE FORUM: PAGE 19

His Margins

Vanish as Foxmulls live sale

LLOYDS Development Capital (LDC),the private equity arm of LloydsBanking Group, has finally signed adeal to buy out a home-grown Britishmanufacturer in a deal first disclosed

by City A.M.last month.LDC has bought Benson Group,

which makes packaging for household brands such as Neurofen and Asdas

cheeky monkey cake, for an undis-closed sum, although a source had esti-mated the deals value at about 70m.

The talks had run into delays, hav-ing kicked off in the spring of this year

when financing was not as tight. ButLDC has finally managed to buy outthe Benson familys two main share-holders, backed by Lloyds and HSBC.

Separately, LDC also sold its majori-ty stake in sports retailer AmericanGolf to Sun European Partners.

Lloyds arm finalcloses in on UK f

BY KASMIRA J EFFORDRETAIL

BY J ULIET S AMUEL & K ASMIRA J EFFORDPRIVATE EQUITY


How Much Value?Crowds queue at the HMV

Hammersmith Apollo

Public Enemy inconcert, KentishTown Forum,

London

Pictures: REX

ANALYSIS l HMV Group PLC

p


3.90

3.80

3.70

3.60

3.50

3.40

3.30

2.9019 Dec

ANALYST VIEWS: CAN HMV TURN ITSELFAROUND AND STAY AFLOAT?Interviews by Kasmira Jefford

MANOJ LADWA |ETX CAPITAL

After 90 years in business, HMV looks set to go down the road of manyother companies that failed to change with the times...Unfortunately, like a bad stockmarket trader, HMVs survival strategy is to sell money makers such as HMV Live toprop up its loss making retail business, a strategy ultimately doomed to fail.

JOHN STEVENSON |PEEL HUNT

Interim losses have expanded to 36.4m, but more critically peak trad-ing remain under pressure, with like-for-like sales down 13.2 per cent over the half year to date. Without a material pick-up, expectations of break-even for the yearlook overly optimistic.

PHILIP DORGAN |PANMURE GORDON

HMV is in a very difficult position, with the next few days crucial if it is toprevent its financial situation deteriorating further. We think that it needs to sell off both Live and 7digital... It is difficult to see equity value being created for the shares.The enterprise value is 179m, of which the equity counts for just 16m.

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JON Moulton is set to take advantageof Britains faltering economic recov-ery with the launch of his sec-ond turnaround fund.

The legendary privateequity boss, pictured,plans to raise up to 200mto invest in strugglingcompanies through BetterCapital Fund II.

Moulton (pictured)launched the first fund two

years ago, after quitting Alchemy, and went onto invest in firms such

as boatmaker Fairlineand Readers Digest. Yesterday Better

Capital chief executive Mark Aldridgetold City A.M. the 2012 fund wouldinvest sums of up to 75m to take con-trolling stakes in British or Irish firmsover the next two years.

We are looking at businesses infinancial difficulty which can beturned around. We dont invest on

the basis of assuming furthergrowth.

Moulton said there will be morechances to invest as banks cut sup-

port to distressed firms. The fundhas raised 158m, which

will be increased by up to 42m. Numishas acted as spon-sor, financial

adviser, brokerand global co-ordinator.

Moulton getsBetter with

second fundBY P ETER E DWARDSPRIVATE EQUITY


CAPCO TO DEVELOP EARLS COURT WITH KWOKS

PROPERTY developer Capital & Counties (Capco) said yesterday it had entered an agreement with Hong Kong property titans the Kwok family to redevelop parts of its Earls Court site. Capco has been in talks for months over plans to turn one of the exhibition centres car

parks into a residential area with 808 new homes and a range of amenities. Picture: REX

NEWS | IN BRIEFHenderson offloads Hermes stakeInvestment management companyHenderson has sold its stake in theHermes private equity fund. Hendersonsaid that there would be no gain or lossfor the group on disposal of its interestfor cash. The company will, however,see its assets under management drop

by 1.4bn as a result of the deal.Henderson inherited the stake when ittook over rival Gartmore at the begin-ning of 2011.

LME starts its own clearing armThe London Metal Exchange has decided tocreate its own clearing service calledLMEClear, it announced yesterday, a movetraders say is designed to make theexchange more attractive ahead of apotential sale next year.

Joe Lewis raises his stake in M&BBillionaire currency trader Joe Lewis'sPiedmont investment vehicle has upped itsstake in pub and restaurant group Mitchells& Butlers, a former acquisition target, toover 25 per cent. Piedmont, which inOctober abandoned plans to make an offerfor the group, is now M&B's largest share-

holder with a 25.65 per cent stake. He'sblocking off any moves organised by oth-ers, said one analyst.

Jacques Vert agrees takeoverSun European Partners has made a cashoffer to snap up Aim-listed Jacques Vert ina deal which values the womenswearbrand at 41.2m. Its shares soared 66 percent on the news, which came nearly amonth after the British fashion retailerissued a full-year profit warning.

Mouchel hopes to return to growthSupport services group Mouchel said itaims to return to growth in 2012, despitethe looming loss of a 130m contract withRochdale Council. The firm said the deal,over which it remains in mutual exit talks,would not make a big impact to operatingprofits or cash. Its pipeline has dropped

from 2.2bn to 1.6bn since July, thanks tolosing out on a contract with West SussexCouncil. Mouchel aims to restructure itsbalance sheet early next year.

Odyssey aims for Atlantic airlineA British venture called Odyssey Airlineshopes to start non-stop all-business classflights from London City to New York andother locations using ten newly-orderedBombardier CSeries passenger jets, avia-tion industry sources said yesterday.

SWEDISH car maker Saab wasdeclared bankrupt by a court yester-day, ending a nine-month survival bat-tle by its Dutch owner.

Saabs former owner and key licence holder General Motors reject-ed a rescue deal from Chineseinvestors at the weekend. The f irm has

not made any vehicles since April.

AGGREKO, the worlds biggest tempo-rary power provider, nudged up its pre-tax profit forecast for 2011 to about324m after a strong finish to the year,leaving it well positioned for 2012.

The guidance represents profitgrowth of about five per cent for thefirm. Revenue was expected to be

about 1.4bn, up 13 per cent on 2010.

Aggreko boostsprofit forecasts

PROPERTY INDUSTRIALS

Carmaker Saabgoes bankrupt

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STEADY growth in the US econo-my means interest rate cuts are nolonger needed, said Richmond Fedpresident Jeffrey Lacker (pic-tured right) in a speech yes-terday.

GDP will grow by between two and 2.5 percent despite the Eurozoneslowdown, he said, on thesame day as PwC publishedgrim forecasts for the majoreuro economies.

Im hard pressedto see the ration-ale for furtherm o n e t a r y s t i m u l u s ,

said Lacker.The doubling of inflation this

year, despite unemployment aver-aging nine per cent, undercuts thehoary notion that slack in thelabour market can be counted on

to keep inflation contained.Inflation can accelerate

despite elevated levels of unemployment.

Lacker joins the FederalOpen Markets Committee,

which determines interestrates, next year, as it rotatesthrough local Fed bosses.

Meanwhile PwC warnedthat even a relatively

mild resolution tothe Eurozone cri-sis could force thelargest euro

economies into deep recessions. A series of orderly defaults, for

example, could be expected to cutGermanys GDP by two per centnext year and one per cent in2013, while the emergence of anew currency bloc would cut 5.5per cent from Italys economy and4.5 per cent from Spains in 2012alone.

Next year is likely to be domi-nated by uncertainty and poten-tial volatility, said PwC economist

Yael Selfin.The fallout from the sovereign

debt crisis is threatening toplunge the Eurozone back intorecession and the euro is likely todepreciate against other majorcurrencies as capital flowstowards safe havens next year.

US GDP set to growas Eurozone shrinksBY T IM W ALLACE

WORLD ECONOMY

RAPID growth in the business serv-ices sector offers hope for the UKseconomic recovery, the Centre forEconomics and Business Research(Cebr) argued yesterday but thethink-tank also warned aEurozone recession could cost theUK 70,000 jobs in the industry.

Business outsourcing is forecastto help IT services to grow by 13.6per cent by 2016, the Cebr said.Management consultancy may

grow by 19.1 per cent, and legaland accounting services could see

turnover rise by 10.6 per cent.However , a Eurozone meltdown

could stop this recovery in itstracks, cutting spending by 1.6 percent and destroying 70,000 jobs,the think-tank claimed.

Demand for business services isexpected to grow healthily as UK retailers and manufacturers inparticular, look to streamline their

business models in todays toughclimate, said Cebr economist RobHarbron. However, a recession inthe Eurozone is not good for UK

exporters nor the business servicefirms which rely on their success.

Business services maydrive economic growthUK ECONOMY

THE UK is the fifth most charitablenation in the world according to theCharities Aid Foundation.

The World Giving Index, topped by the USA, shows that the world has

become more charitable in the last year.

The UK is the second most generousnation in monetary terms, with 79 percent of Brits donating each month.

Twenty-eight per cent of the British

population volunteer every month, while 63 per cent help a stranger.

UK is the fifthmost charitablnation globally

CHARITY

News14 CITYA.M.20 DECEMBER 20

NEWS | IN BRIEF

Poor pay largest share in dutyLow-income households have paid agreater share of their income in tax ontobacco and alcohol than any othergroup in every year from 1997 to 2010,figures from the Office for NationalStatistics (ONS) show. The bottom fifthspent 1.6 per cent of their disposable

incomes on alcohol duties and three percent on tobacco duties in 2009/10,compared with 0.9 per cent and 0.3 percent respectively for the top fifth.

Pension opt-out cuts pot by fifthThe average working man will cut hispension pot by 19,000, or 20 per cent,if he opts out of the incoming auto-enrolment pensions scheme for the firstten years of his working life, Prudentialwarned yesterday. However, the workerwould be better off by 620 per year interms of disposable income. For someyoung people starting out in their careeror building a family, taking on the addi-tional expense of investing in a pensionmay not be a high financial priority ini-tially, said Prudentials Barry ODwyer.

279,000 on dole for over a yearOver a quarter of a million people arespending a second Christmas on job-seekers allowance, according to a TUCstudy out today. The number of long-term unemployed has doubled from122,000 in 2007 to 279,000 today, andup 35,000 on December last year.

NEW CIVIL SERVICE BOSS

INCOMING civil service boss Sir Bob Kerslake faced a grilling from MPs on the Public Affairs Select Committee yesterday. He sees himself as a champion of change and toldthe committee he would provide visible leadership for the civil service. Kerslake takesup the role on 1 January.

INCOMES took a further battering inNovember and consumers expecthouse prices to fall further into next

year, according to todays Nationwideconsumer confidence survey whichrecorded a tiny rise in confidence.

The headline consumer confidenceindex rose four points in the month to40, still 37 points below its long runaverage of 77 and seven points lowerthan the same point last year.

Expectations for future economicconditions also rose to 55 from 48 asemployment and income hopes grew.

Economist Robert Gardner warnedthe rise should not be overstated.

There have been few positivedevelopments in the wider economy to lift consumers spirits in recentmonths, he said. Signs that infla-

tion has passed its peak may haveprovided some comfort, but at 4.8 percent in November, the cost of living

was still rising at more than twice thepace of underlying inflation.

The spending index rose very slight-ly, from 75 in October to 77 inNovember, which suggests tradingconditions will remain difficult forretailers in the run up to Christmas.

UKs householdsfacing hard timeahead of ChristmBY T IM W ALLACE

UK ECONOMY

ANALYSIS l Confidence remains very lowNationwide Index

Nov 2007 May 2008 Nov 2011Nov 2009

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Socit GnraleThe firms private banking division hasnamed Eric Verleyen as the chief invest-ment officer of Socit Gnrale Private

Banking Hambros in London and pro-moted Alexandre Cegarra to chief investment officer at Socit GnraleBank & Trust in Luxembourg. Verleyen

previously held the same role at SocGens Bank & Trust branch, whileCegarra worked for Dexia and HSBCbefore joining the bank.

T Rowe PriceThe asset manager has appointed Wimde Ruijter as a client relationship man-ager for mid-Europe, based in theAmsterdam office. Ruijter was mostrecently a senior sales and accountmanager for F&C Netherlands BV.

MBA PolymersThe cleantech recycler of high-valueplastics has appointed Nigel Hunton tosucceed Richard McCombs as chief executive, effective from 2 January.

Hunton joins from Edwards Limited, theglobal vacuum technology company,where he was most recently chairman.

Berwin Leighton PaisnerThe law firm has appointed corporate

partner Ken Cheung to its Singaporeoffice. Cheung is currently a partner atSingapore-based Watson, Farley &Williams, where he is head of the lawfirms corporate practice in Asia.

EvershedsThe law firm has appointed AndrewLegg, formerly at Mayer Brown, as apartner in its London financial servicedispute resolution team. Legg spe-cialises in litigation and advises

clients on banking and financial serv-ices issues, including insolvency relat-ed disputes, investigations andregulatory work and M&A disputes.

London & Stamford PropertyPeter Schwerdt has joined London &Stamford as a senior member of itsresidential team. He previously spent18 years at Grainger, where he wassubsidiary director in charge of salesand acquisitions.

Dexia Asset ManagementCcile de Lasteyrie, head of clientdevelopment at Dexia AssetManagement, has been promoted tohead of SRI development.

CITY MOVES |WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVES please email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

BEST OF THE BROKERS To appear in Best of the Brokers email your research [email protected] l 3i Infrastructure PLC

120.0

117.5

115.0

Oct Nov Dec

p118.80

19 Dec

3i INFRASTRUCTUREJP Morgan Cazenove rates the infrastructure investment company asoverweight, following a deal announced yesterday that will reduce itscash balances but enhance its dividend yield. The broker says the acquisi-tion of Networks Finland is a core infrastructure deal that differentiatesthe company from other PFI-focus peers, and one that could offer theprospect of a 5-10 per cent cash yield and a 10-16 per cent total returnfrom a regulated entity.

ANALYSIS l Ashtead Group PLC

200

160

180

140

Oct Nov Dec

p 213.5019 Dec

ASHTEADUBS rates the equipment hire business as a buy with a target price of 270p, after rival United Rentals announced a merger with RSC lastweek. As a result of the United Rentals deal the broker expects depotsto close and staff to be shed at the merging companies, meaningAshtead should benefit as the sectors next largest player. It sees theopportunity for organic growth at Ashtead as very attractive in thenear term.

ANALYSIS l Dominos Pizza Inc526.0

393.1

459.6

Oct Nov Dec

p

400.4019 Dec

DOMINOS PIZZAGoldman Sachs adds the pizza delivery company to its convictiolist with a target price of 575p, saying the business offers an attractcombination of high cash return and medium-term structural growtpotential. Dominos plan to operate around 1,200 stores by 2020 fiwith the brokers belief the trend towards home delivery dining remstrong, and expects 60 of the new stores openings to come in the nyear.

Standard LifeCharles Guay has been appointed as presidentand chief executive of Standard Life Canada.He will start on 1 February 2012 to replaceJoseph Iannicelli, and is joining from NationalBank of Canada, where he is senior vice presi-

dent, strategies, marketing and investmentsolutions, wealth management. He additionallyholds the role of president and chief executiveof National Bank Securities. Previously, Guayheld roles at Fidelity Investments Canada, RBCand Lvesque Beaubien Geoffrion.

B ANKS dragged the FTSE 100lower in extremely light trade yesterday after the Britishgovernment estimated the

cost to banks of reforming the UK banking system could be as much

as 8bn.Londons blue chip index wasdown 22.35 points, or 0.4 per cent,at 5,364.99, with volumes at just 67

per cent of their already weak 90-day average.

Most active market participantsseem to have had enough of 2011and are prepared to sit tight and

wait and see what 2012 brings,said Oliver Wallin, investmentdirector at Octopus Investments.

It seems that the likelihood of another seasonal Santa rally isdiminishing.

Lloyds Banking Group slipped 4.2per cent, while Royal Bank of

Scotland lost three per cent.British online grocer Ocadoslipped 16.9 per cent after issuing aprofit warning.

Entertainment retailer HMV fell27.7 per cent after it warned itcould go out of business as a down-turn in consumer spending acceler-ates the long-term decline of itscore CDs and DVDs markets.

Santa rally looks unlikely as FTSEloses ground on very light volumesTHELONDONREPORT

p

14 Dec13 Dec 15 Dec 16 Dec 19 Dec

5,550

5,350

5,400

5,450

5,500

ANALYSIS l FTSE

5,364.9919 Dec

Bank of America leads US stock fall

B ANKS dragged the US stock market lower yesterday, with losses accelerating lateafter Bank of America s

stock price fell below $5 for the

first time in nearly three years.

When BofA, the largest US bank, plunged through $5, itignited a late-day decline in thesector and the broader market,

which fell by one per cent.Meanwhile, JP Morgan Chase

fell 3.7 per cent and Citigroupslumped 4.6 per cent.

The Dow Jones industrial aver-age was down 100.13 points, or0.84 per cent, at 11,766.26. TheStandard & Poors 500 Index was

down 14.31 points, or 1.17 per

cent, at 1,205.35. The NasdaqComposite Index was down 32.19points, or 1.26 per cent, at2,523.14.

Winn-Dixie Stores surged 71 percent after agreeing to go privatein a $560m all-cash deal with Bi-LoLLC.

More than three-quarters of companies traded on the New

York Stock Exchange fell while 76per cent of Nasdaq-listed issues

closed in negative territory.

THENEW YORKREPORT

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IN TRADING, as in much of life, thereexists a delicate balance between div-ing headfirst into the future and por-ing over every historical detail before

acting. The former risks ignorance, with your head stuck in the sand, while the lat-ter can result in the repetition of past mis-takes and a failure to seize the day. Theinimitable wisdom of Mark Twain aremarkably unsuccessful investor, but one

who made good on his debts is pertinent:History doesnt repeat itself, but it doesrhyme. Looking back at 2011 wont reveal2012 into perfect focus, but it might exposeto some traders some developments they should keep an eye on in the coming year.

WHERE THERES SMOKEIan OSullivan of Spread Co notes: Two of the best performers in the FTSE 100 this

year were two stocks that many people loveto hate the tobacco companies. He sayscost-cutting measures and continuedexpansion and growth in emerging mar-kets where tobacco consumption isincreasing, rather than decreasing as in the

West have seen Imperial Tobacco gain 19per cent and British American Tobacco gain20.6 per cent in 2011, on pretty strongupward trends. He thinks the prognosisfor 2012 should be no different: Investorsshould be looking to buy British American

Tobacco on any weakness back towards25/26, and Imperial Tobacco on any pull-

backs towards 21/22.

FIELDS OF GOLDGold, explains Will Hedden of IG Markets,may have lost some of its 24-carat shine inthe last month, but it is still up comfortably on the year: Those investors lucky enoughto have been involved long term can still behappy with the profits. He adds: Many long-term bulls I have spoken to are posi-tioning themselves for further rises, usingthe recent correction to consolidate and

It may pay to buy intotobacco, pharma andgold, says Philip Salter

Keep your eye on the ball Picture: GETTY

Wealth Managemen t | Contracts for Difference16 CITYA.M. 20 DECEMBER 20

Looking at 2011 to showyou the money in 2012

WERE now into the last trading week before theChristmas break. Traders and investors will behoping for less volatility following recent mar-ket turmoil. After all, they wont want their long

Christmas lunches interrupted by desperate calls from theoffice.

It hasnt been the best year for long-only equityinvestors, especially those who have followed the mainbenchmark indices. The FTSE 100 is down about 9 percent. The German Dax has fallen 17 per cent, and eventhe S&P 500 has lost 3 per cent, despite hopes of USdecoupling. Back at the beginning of 2011, stock indiceswere still feeling the benefits of growing investor riskappetite. This followed the US Federal Reservesannouncement of a second major round of quantitativeeasing in November 2010. But by mid-February therewere concerns that the European debt crisis was spread-ing beyond Greece and Ireland. Then the earthquake andtsunami hit Japan. Equities slumped, but then recoveredsharply, before trading in a relatively narrow range untillate summer. But political wrangling over the US debtceiling led to Standard & Poors downgrading AmericasAAA sovereign debt rating and equities sold off sharplyagain.

Unfortunately, US policymakers are now at logger-heads over plans to extend further temporary payrolltax cuts. In addition, the European debt crisis continuesto escalate and concerns are growing over the future of the Eurozone and the single currency.

So, the overall hope is for a last minute feel-good pophigher in equities, which will help to put a coat of glosson a disappointing twelve months. It would be a greathelp if euro-dollar manages to stabilise above $1.30 oreven recovers some of its recent losses to push back uptowards $1.32, or even $1.34. But the currency pairremains dangerously close to $1.2875, which was the lowfor the year hit back in early January. A significant breakback below $1.30 will suggest that a retest of the low ison the cards. This will weigh on equities as it will encour-age investors to cut their long side exposure and reducerisk. Consequently, equity investors will be hoping thatratings agencies have shut up shop early and leave anyEuropean bank or sovereign downgrades to the new year.

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prepare to re-enter at favourable levels. Hesays they cite a push to $2,000 per ounce asa result of the European Central Bank

becoming a lender of last resort and insti-gating quantitative easing. OSullivanthinks whichever way gold goes, it is goingto be volatile and not a ride for the faint-hearted. He notes: If the support around$1,550-$1,575 gives way, we could go as low as $1,500 or $1,450. On the other hand, hethinks inflation could maintain goldsappeal as a store of real wealth, seeing it

back around $1,700-$1,800.

UTILISING PHARMA Angus Campbell of Capital CFDs thinksdefensives could be an attractive area forinvestors in 2012. He says many of the util-ity stocks have been increasing their divi-dends in the last year or so and evenmanaged to eke out a gain on the year,

which would be attractive to any investorconsidering most benchmarks havedeclined. He says: Going into 2012

investors will probably be seeking yield, ascapital gains could continue to be hard tocome by and many other companies have

been gradually increasing their dividends.For the income investors, there should beplenty of attractive stocks out there. This isrelevant for CFD traders, because if long,they also receive dividends like holders of the underlying do.

Brenda Kelly of CMC Markets likes thelook of the pharmaceutical sector, even

with global growth headwinds. She believes the baby-boomer scenario will fanthe flame of this sector for the next few

years as the global population ages and theretiring community look to invest in whatis normally deemed a safer, income yield-ing asset.

Predictions aside, if you are trading overChristmas and into the new year there isone piece of advice that all experts canagree on. Kelly warns traders to stick to vir-gin eggnog alcohol and the financial mar-kets do not a successful marriage make.

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I TS been quite a year: theEurozone is in crisis and the USlost its AAA credit rating fromS&P. But economists warn that

next year could be worse. There might be a repeat of 2008 a credit crunchand another recession. Worse, thehead of the IMF Christine Lagarde

warns of a lost decade. The year started with a brace of

extraordinary events: the Arab Springand Japanese tsunami, causing eco-nomic shocks and deep dislocationsaround the world. Fears of a globalrecession then loomed large. Theextraordinary fall in global markets in

August and September was testamentto these concerns.

The euro crisis was undoubtedly thedominant reason. The outline of a dealto address Greeces unmanageabledebt load proved too late to preventcontagion from spreading to Italy andSpain and even touching countries likeFrance and Austria.

This pressure culminated in EU lead-ers (except David Cameron) declaring aeuro-plus pact, which outlined con-crete steps towards a fiscal union tocomplement the shared currency andto develop a liquidity provider as a

backstop for banks. This could solvethe immediate crisis, but the structurestill needs work to generate growth.

Euro countries need budget disci-pline something that bond marketsarent used to imposing. However,thats changing as part of the summitproposals, which include automaticpenalties for violations of fiscal rules.

And bond markets certainly differenti-ate now among borrowers. This could

be vital, since countries will arguably respond to bond market pressure more than sanctions.

The Eurozone now needs a liquidity backstoplike the IMF provides for the global economy. The

attempt to create a temporary rescue fund (orEFSF) isnt working because its limited by the fis-cal capacity of the six AA A-rated countries in theEurozone. A currency needs a central bank thatis the lender of last resort to provide liquidity.

The ECB doesnt have that role. The crucial ques-tion is whether the EU summit deal provides thefiscal compact that might allow it to step up.

In the longer term, theres also the question of exit. There are two criteria for being in an opti-mal currency area: trade integration and conver-gence of incomes. All 17 countries trade largely

with each other, so the first is met. The second istougher. For a country to grow sustainably in amonetary union requires it to be competitive. Itcant come from devaluing the exchange rate, soit has to be based on low cost and higher produc-

tivity. If a country doesnt share growthprospects, then its not viable to share a currency.

Euro exit has been raised by GermanChancellor Angela Merkel and French PresidentNicolas Sarkozy, so its become a question of cop-ing with the consequences. This leads back toneeding those key sources of support: liquidity

backstop (EFSF or the IMF) and preferably a cen-tral bank that can step in if it all goes wrong.

The ongoing debt crisis also puts Europes banking system under increasing stress. TheEuropean Banking Authority wants banks torecapitalise by 114.5bn (96.16bn). Bloombergreports that banks want to trim their balancesheets by 750bn in the next two years to raisethe capital. It could mean another credit crunch.

Spencer Dale, the Bank of Englands chief economist, told me Britain could suffer a repeat

of 2008 and that unless UK banks relatively quickly issue unsecured term debt theres a realrisk that credit conditions in our economy couldtighten further.

The UK economy is already in recessionaccording to John Llewellyn, an adviser to the

Treasury. That echoes the forecast by the OECDthat Britain is in a mild recession and is consis-tent with the flat growth expected by the Bank of England until the middle of 2013.

2012 also looks in danger of repeating theglobal recession of 2008. I recently hosted a panelof leading economists and they all warn that the

world economy looks fragile. StandardChartereds chief economist Gerard Lyons themost accurate economic forecaster in the worldaccording to our assessment sees the globaleconomy growing at only 2.2 per cent but its atale of two worlds: the fragile West, and theresilient East.

In the first half of 2012, Standard Charteredforecasts a deep recession in Europe, and thatthe US will grow at just 2 per cent. Even thoughemerging economies wont be entirely de-cou-pled from Western woes, he expects that they

will manage to grow as theyre better diversifiedthan three years ago. We face another challeng-ing year, but there are still some bright spots.

Linda Yueh is economics correspondent for Bloomberg Television. Watch The Economy and Yueh on Bloomberg Television from 26 December. Times at www.bloomberg.com/tv

18 The Forum CITYA.M. 20 DECEMBER 20

Growth next year will be atale of two worlds: a fragileWest, and the resilient East

2011 saw an Arab Spring andthe euro in crisis get readyfor even more drama in 2012

cityam.com/forum

LINDA YUEH

Agree? Disagree? Got a sharp comment?The Forum wants you to join the debate.

COMMENT NOW ON

Twitter: @cityamforum;

on the web : cityam.com/forum;

or by email: [email protected].

Top responses will be reprinted in The Forum.

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Lifestyle | Restaurant Review20 CITYA.M. 20 DECEMBER 2011

WORDS BYZOE STRIMPEL

HEAD SOMMELIER AND MANAGLUTYENS RESTAURANT

ANDREW CONNO

QUAFFERS CORNER

IF you are roasting a Turkey this Christmas,I direct you to my earlier article onThanksgiving (still available on the City A.M.website) for more exotic meats read on.

Duck, Goose and Pork are, lets not mince words,fatty. What they need is a wine with a whack of acidity to cut through that fattiness and cleansethe mouth, coupled with a good dose of tanninto get to work breaking down the protein.Ladies and Gentlemen, allow me to presentNebbiolo.

When used to make Barolo or Barbaresco inPiemonte, Nebbiolo can yield ferociously tannicwines that need decades to show their best.But there are some more obscure wines fromthis corner of North Italy that provide the req-uisite combination of acid and tannin withoutneeding an eternity in the cellar.

Langhe Nebbiolo is an appellation thatencompasses the wine growing area thatincludes Barolo and Barbaresco but is general-ly made in an appealing, early drinking style.The one Im talking about is from Produttoridel Barbaresco, a cooperative winery in (youguessed it) Barbaresco, but quality examplesabound and there hasnt been a truly awful vin-tage in Piemonte since 2002.

Next door, in Roero, the sandier soils givelighter, charming wines from Nebbiolo grapestoo, and north of the Langhe zone, in such his-toric places as Ghemme and Gattinara, thewines have Barolos haunting fragrance but alittle less tannic muscle.

Over the border in Lombardia they callNebbiolo Chiavennasca, and use it to make akind of quasi-Amarone by drying whole bunch-es of the grapes for several weeks before fer-mentation. This is Sforzato di Valtellina (orSfursat in the local dialect), an imposing, con-centrated wine. Its also worth checking outthe wines of Valtellina Superiore, made fromChiavennasca and boasting such evocativenames as Sassella, Maroggia, Stagafassli andInferno. These are Alpine wines with brisk,mouth-cleansing acidity and spice and red fruitaromas (think cherries and raspberries).

This will be my last column for 2011. Id liketo thank my loyal readers. The number of peo-ple whove told me they enjoy my articles hasbeen gratifying. I wish you all a merryChristmas and hope that youll have a chance

to get some rest over the festive season.Lutyens will be closed from 24 December re-opening 4 January, so I am looking forward tospending some time with my in-laws in Berlin.Cheers.

Follow Andrew on Twitter @LutyensWine

For turkey, tryout a Nebbiolo

FOOD & BOOZE NEWSBY STEVE DINNEEN & ZOE STRIMPEL

MONTHLY ART AT SUDA THAICovent Gardens Suda Thai restaurant (pic-tured left) is hosting monthly art installationsto showcase work from up-and-coming artists.Kicking off is industrial designer KijtanesKajornrattanadech, whose Trace of Shadowcollection is on display now. Following on inJanuary will be a selection of works fromaward-winning photographer and columnistOat Chaiyasith, official photographer to the

Thai royal family, who will exhibit his 365Faces project. www.suda-thai.com

DEL AZIZ OPENS IN CLAPHAMThis Middle Eastern-inspired chain known forits pastries and meringues the size of the aver-age human head is a trusty favourite for fami-lies and coffee-addicts with laptops. This onehas a deli-caf, gift shop, restaurant and twobars. Food ranges from Berber pancakes tofresh juices and full English breakfasts. Zahrabar, set to launch in January, will host a bellydancers and a range of DJs. This is the ultimate

all-day enterprise. 55-57 The Pavement,Clapham. www.delaziz.co.uk

ITS JUICEOLOGYCocktail genius Joe McCanta has devel-oped a soft drink brand, using his expert-ise in flavour matching to blend freshpurees, juices, botanicals, herbs, spicesand soft spring water. The drinks containonly natural sugar and no artificialflavourings or preservatives. Flavoursinclude coconut water and white guava,lychee, berry and basil and mandarin gin-

ger and cardamom. Delicious.www.tastejuiceology.com

Restaurant 3434 Grosvenor Square, W1K 2HDTel: 020 3350 3434

FOOD hhhiiSERVICE hhhhhATMOSPHERE hhhhh

Cost per person without wine: 50

YOU missed Bill, my companioninformed me as I sat down to dinnerat 34, the new restaurant fromRichard Carings Caprice Holdings

Group. Bill Clinton, he clarified. Like fel-low Caprice outposts Scotts, The Ivy and JSheekey, 34 has serious pulling power. Sad

cityam 2011-12-20

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